Cost-cutting drives outsourcing growth

New research indicates that companies providing IT products and services will continue to increase their use of outsourcing agreements in order to lower overhead expenses.

According to a report published Monday by Evans Data, which culls information from developers at tech companies, 33 percent of businesses surveyed intend to increase their use of outsourcing during the next year, while only 6 percent said they are planning to decrease their number of outsourcing pacts.

Outsourcing involves the process of transferring work to an outside company rather than keeping it in-house.

In terms of overall workload, 45 percent of respondents to the Evans survey said they outsource less than a quarter of their development operations, with only 7 percent reporting that they farm out better than 50 percent of that sort of work.

According to the study, companies are focused increasingly on outsourcing as a way to cut costs rather than find specific expertise, reversing a trend of years past. Some 28 percent of the companies participating in the survey said that saving money was their primary goal in adopting outsourcing pacts, while only 19 percent listed a demand for specialized expertise as their objective.

By contrast, only 15 percent of the companies surveyed in 2000 listed cost cutting as a main driver for outsourcing, while 44 percent said they used the arrangements specifically to garner skilled talent.

Researchers at Evans said that they expect the trend toward budget-related outsourcing to continue to grow.

"Outsourcing once made use of high-level experts to bring particular expertise to a development project, but now we're seeing that outsourcing is much more likely to be used to save development costs," John Andrews, chief operating officer at Evans, said in the report. "Most companies outsource lower-level programming tasks that are more cost-effective to (farm out), rather than devoting an in-house programmer to such jobs."

According to the study, which included input from more than 400 individuals, 61 percent of companies surveyed plan to increase their IT-related investments over the next year, compared with 53 percent one year ago. Only 10 percent of survey respondents said they plan to reduce technology spending during the next year.

Of course ...

Does this surprise anyone? The bottom line is all corporations care about. And they do not seem to understand this is going to bite them in the end ... as when the middle class in the US erodes they will not be able to count on Indians and Chinese to buy $40000 cars.

Of course ...

Does this surprise anyone? The bottom line is all corporations care about. And they do not seem to understand this is going to bite them in the end ... as when the middle class in the US erodes they will not be able to count on Indians and Chinese to buy $40000 cars.

[Stating]

Symptom of Low Growth, Low Margin

If U.S. based companies were leading the world in newer, high-value, high-margin products and services then they would not be facing the type of commodity pricing that leads them to outsource to cut costs. Of course, if we are focused on selling products and services that are also offered by low cost producers in 3rd world countries then it will continue to be a race to the bottom, and U.S. producers will have to continue to look for any means available to cut costs. This includes, of course, offering meager raises and cuting benefits to employees. The dialog needs to focus on how we raise the tide for U.S. companies to move ahead of the world and get back to the offering products that the world clammors for and cannot be obtained anywhere else. If we had taken the $300+ billion that we poured into the rathole in Iraq to spearhead a "take back the economy" crash program, then we would be on track to reprise the dominant role that we had in the 1950's - 60's, with the attendant prosperity. A prosperous country, which today we are not, does not have cities that are cash strapped and focused on cutting services, closing libraries. It does not have schools that look like something out of the 1940's. It does not have gridlocked roads laden with potholes.

[Stating]

Symptom of Low Growth, Low Margin

If U.S. based companies were leading the world in newer, high-value, high-margin products and services then they would not be facing the type of commodity pricing that leads them to outsource to cut costs. Of course, if we are focused on selling products and services that are also offered by low cost producers in 3rd world countries then it will continue to be a race to the bottom, and U.S. producers will have to continue to look for any means available to cut costs. This includes, of course, offering meager raises and cuting benefits to employees. The dialog needs to focus on how we raise the tide for U.S. companies to move ahead of the world and get back to the offering products that the world clammors for and cannot be obtained anywhere else. If we had taken the $300+ billion that we poured into the rathole in Iraq to spearhead a "take back the economy" crash program, then we would be on track to reprise the dominant role that we had in the 1950's - 60's, with the attendant prosperity. A prosperous country, which today we are not, does not have cities that are cash strapped and focused on cutting services, closing libraries. It does not have schools that look like something out of the 1940's. It does not have gridlocked roads laden with potholes.

[heystoopid]

Feedforward/feedback effect

Cia world fact book USA GDP per capita US$37800(2004) composition by sector Agriculture 2%, Industry 18%, Services Sector 80%. Note the key sector contribution to the economy is Services, oh well by outsourcing the entitire services sector to third world countries, who's gonna be left to serve customer! Alas, the next generation of employees, will be paying in buckets and spades literally, for todays short sighted cheap ideas, but man those paper figures look fantastic though, and Wall Street, loves paper trillions!, never mind who's gonna pay for it though!

[heystoopid]

Feedforward/feedback effect

Cia world fact book USA GDP per capita US$37800(2004) composition by sector Agriculture 2%, Industry 18%, Services Sector 80%. Note the key sector contribution to the economy is Services, oh well by outsourcing the entitire services sector to third world countries, who's gonna be left to serve customer! Alas, the next generation of employees, will be paying in buckets and spades literally, for todays short sighted cheap ideas, but man those paper figures look fantastic though, and Wall Street, loves paper trillions!, never mind who's gonna pay for it though!